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The Centrica-owned group said it will give more than 200,000 vulnerable customers receiving the Government's warm home discount a £76 credit to offset the tariff increase.

Scroll to the bottom of this piece to read British Gas's defence of the price rise, and to get tips from Which? on saving money.

Centrica-owned British Gas said the price rise announced on August 1 is its first since November 2013 (Image: PA)

But the price rise was condemned by the Government and saw consumer groups repeat their plea for households to switch and fix to get the best deal.

A BEIS spokesman said: "Energy firms should treat all their customers fairly and we're concerned this price rise will hit many people already on poor-value tariffs."

He added: "Ofgem has committed to taking prompt action, in consultation with consumer experts, to develop proposals including a safeguard tariff.

"We want to see rapid progress on this commitment and are ruling nothing out."

Last of big six to increase prices

British Gas is the last of the Big Six providers to increase prices after it promised in December last year to freeze tariffs until August, with its rivals moving to raise bills at the start of the year.

Confirmation of the decision comes after a blunder on Monday saw the group mistakenly publish an incomplete statement about increasing electricity tariffs on its website.

The rise was also announced alongside half-year results from British Gas owner Centrica revealing that earnings from its consumer business plunged by more than a quarter after it lost 377,000 UK customer accounts in the first half.

Underlying operating profits from its UK home energy supply arm tumbled 26 per cent to £381 million as the group said it was also hit by warmer than normal temperatures and the pre-payment tariff cap.

Centrica's overall underlying operating profits were 4 per cent lower at £816 million for the six months to June 30, but shares rose 2 per cent.

The group said the increase was its first since November 2013 and insisted its overall electricity costs had increased by 16 per cent since then.

Centrica chief exec spoke to BBC

Centrica chief executive Iain Conn told BBC Radio 4's Today programme that while the commodity price of electricity had come down, it was facing "significant cost pressure" on transmission and distribution, as well as costs associated with government policy.

He added: "The net effect of both of these is an increase of about £62 on the average bill, and that is the main driver of the increase, combined with the fact that our electricity prices at British Gas have been some of the cheapest in the market, and actually we're now selling our electricity at a loss, which is clearly not sustainable."

The logo of consumer group Which? (Image: Which?)

But the move flies in the face of the Government, which made a pre-election pledge to introduce a price cap, although that has since been watered down.

Ofgem is now consulting on a safeguard tariff for vulnerable customers and reforms to standard variable tariffs.

Alex Neill, of consumer group Which?, said: " Hard-pressed consumers waiting to see how the Government will tackle costly standard variable tariffs will be disappointed to see prices rising.

"Customers concerned about their tariff should switch to a fixed-price deal now."

What Centrica CEO said to defend British Gas price increase

Mark Hodges, CEO of Centrica Consumer, posted a full statement on the British Gas website.

He offered several arguments in defence of the price rise, including:

No price rise in four years (until this one)

Two thirds of customers apparently won't be affected

Satisfaction is high when it comes to British Gas customer service

Customer rewards are available for loyal British Gas devotees

Read his full defence below.

"British Gas hasn’t had a price rise for nearly four years. In fact we’ve been reducing prices. It’s been a very difficult decision to make but the costs of providing electricity are rising.

"We’ve held off making an increase for as long as possible, and for many months after other suppliers significantly raised their prices.

"Standard tariff electricity will go up by 12.5% on 15th September. For a typical household on dual fuel, the average annual bill will increase 7.3% or £76. We know that any rise in energy bills is unwelcome for customers, who want their bills kept as low as possible.

"Even after the price goes up in September, British Gas’ standard variable tariff will cost customers less than it did back in November 2013.

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"5.3 million households – just under two thirds of our 8.4m customers -- will not be affected by the change. They may be on fixed term energy deals; they may be gas-only customers; or they may have a prepayment meter. The regulated tariff cap for our prepayment customers, set by Ofgem, will be updated in October: we’ll write to them in the next few weeks, once we have the details.

"But there’s another very important group that we will ensure is protected from the price increase this winter: our most vulnerable customers.

"For more than 200,000 standard tariff customers in the core group who automatically receive the Warm Home Discount, British Gas will credit their account with £76 over the winter months. Vulnerable customers are a focus for Ofgem in its plans to improve the energy market, and we support that.

"We have submitted our own proposals to Ofgem and to the Government which have the potential to drive greater competition, choice and fairness in the energy market so that it works better for all. These are to phase out ongoing standard variable tariffs across the market, also known as “evergreen” tariffs; and to level the playing field so that all energy suppliers pay a share of government imposed social and environmental levies, giving more customers access to benefits like the Warm Home Discount (which some suppliers don’t offer).

Energy prices will rise

"Since our last price rise in November 2013, some costs have risen steadily -- among them Government policies to subsidise renewable energy, social levies, delivery to customers’ homes, and the nationwide smart metering programme. In that time, overall electricity costs have increased by 16%.

"Our ongoing and significant drive to cut our own costs has allowed us to protect customers from increases for a considerable time. Unfortunately we are now at a point where we need to raise the electricity price to reflect the cost increases.

"British Gas has long been one of the cheapest suppliers for standard rate electricity, and remains so.

"Over the last year or so, we have listened to concerns raised by the Government, regulator and consumer groups about the energy market, and have taken tangible action. We froze our standard tariff through last winter and then on to this summer. Today we’re confirming our gas price will remain unchanged.

"We have fulfilled our commitment to contact proactively about 5m of our customers on the standard variable tariff, offering them attractive deals they might switch to, and ensuring they are on the right tariff for them.

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"Earlier this year we introduced a new scheme, British Gas Rewards, to reward customer loyalty and we’ve seen strong early sign-up with 150,000 members to date. Since the launch in April we have built a portfolio of attractive rewards, ranging from a free movie from the Sky Store to competition prizes of more than £1,000. There will be more from British Gas Rewards in the coming weeks.

"We are leading the nationwide rollout of smart meters, which help customers to understand and better manage their energy consumption through the energy insights we can share with them. Smart meters will also enable consumers to switch supplier, if they choose, much more rapidly. Switching is currently at record levels, and customers have nearly 60 suppliers to choose from.

"Customers looking at the energy market rightly expect a high quality of service, as well as a competitive price. They get that from British Gas – satisfaction scores among our energy customers have been rising, and complaints have been falling. On price, Ofgem data shows that British Gas currently offers the lowest standard variable tariff across the ten largest suppliers. Even after the September price rise, we’ll still be near the top of that list, with a tariff cheaper than what 84% of households on standard tariffs pay for their energy.

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"British Gas is also announcing today that customers who want to fix their energy prices can do so, on a specially discounted deal, until August 2019. The Home Energy Secure tariff will cost an average £1107 per year.

"The planned electricity price rise we’ve announced today is the first increase we’ve made in almost four years. It’s a step we have taken reluctantly, and many months after most of our competitors. I want to assure all our customers that we will work hard to be as efficient as possible, deliver great service, and help them keep their bills down."